Cattle & Ranch Report

June 5, 2024

Live Cattle:

A slow start for a market with so much optimism.  Futures traders appear apprehensive to push premium, or even narrow the positive basis to a width that may have some benefit.  I think vertical integration has already taken a large step forward.  Consumers continue to battle inflation with the government perceived as fueling it.  The triangle appears well established and I have reservations of traders taking prices out of anytime soon.

Feeder Cattle:

Stating a fact has no bearing on a market.  However, what I will say is that feeder cattle prices are too high and historically produce excessive losses in feeding to fat when this high.  Or better stated, when the width of the spread between starting feeder and finished fat is over $55.00.  Most spreads are above $66.00.    As above, if vertical integration has taken another large step then I have little doubts there is some profit margin.  However, the wide spread is robbing profit margin at the get go.  I expect the spread between the two to narrow with some reservations being taken by cattle feeders.  I know the video sales are around the corner and many are expecting soaring prices.  I really do hope they do.  If so, then the full extent of the hedge can be realized.  If not, then one maintains a minimum sale price at or above historical levels of the index.  Prices are at the known top in the cash markets, little premium remains in the futures, with basis narrowing quickly.  This seems a little odd to the optimism backgrounders have for cattle feeders. Cattle feeders have been the second best friend to the backgrounder next to the futures trader.  With futures traders already not offering nearly as much as previous, what happens if cattle feeders make a like decision?  Everything is riding on the ability or desire of the cattle feeder to continue to bid higher.

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